UPSC EDITORIAL ANALYSIS – Budget 2024 — long on intent, short on details
Kartavya Desk Staff
Source: The Hindu
Continuation of article: Union Budget 2024-25 — no signs of learning
• Prelims: Indian Economy(GDP, GVA, fiscal policy, budget, FRBM, gross fixed capital formation (GFCF), economic survey, budget, Employment etc )
• Mains GS Paper III: Fiscal policy, Monetary policy, GDP, Issues related to planning etc.
ARTICLE HIGHLIGHTS
• The Union Finance Minister presented the seventh consecutive Budget. The Economic Survey 2023-24 Government has eased the burden of regulation on business and goaded the private sector into generating productive jobs out of “enlightened self-interest”.
• The Economic Survey 2023-24 Government has eased the burden of regulation on business and goaded the private sector into generating productive jobs out of “enlightened self-interest”.
INSIGHTS ON THE ISSUE
Context
Budget:
• The government’s blueprint on: expenditure taxes it plans to levy other transactions which affect the economy and lives of citizens.
• expenditure
• taxes it plans to levy
• other transactions which affect the economy and lives of citizens.
• Article 112 of the Indian Constitution: Union Budget of a year is referred to as the Annual Financial Statement (AFS).
• The Budget Division of the Department of Economic Affairs in the Finance Ministry is the nodal body responsible for preparing the Budget.
• Components of the Budget: expenditure receipts deficit indicators.
• expenditure
• deficit indicators.
• Depending on the manner in which they are defined, there can be many classifications and indicators of expenditure, receipts and deficits.
#### Budget 2024-25:
Key positives from budget:
• The intentions and vision for Vikisit Bharat@2047 are spelt out through the nine priority areas A long-term vision, to which subsequent Budgets would adhere
• A long-term vision, to which subsequent Budgets would adhere
• Explicit recognition of the problem of unemployment in the economy. Budget devotes considerable space in listing out initiatives towards generating employment.
• Budget devotes considerable space in listing out initiatives towards generating employment.
• The compulsions of a coalition government surface in parts, but are hidden in some of the specificities.
Key steps:
• The fiscal arithmetic and the macro-policy signal continuity and a carrying on with fiscal consolidation efforts.
• The overall fiscal deficit has been lowered to 9% compared to 5.1% targeted in the interim Budget.
• A large part of the surplus received from the Reserve Bank of India has been used to buttress fiscal prudence.
• The new medium-term fiscal consolidation path has been linked to a reduction in the debt/GDP ratio instead of continued compression of the fiscal deficit/GDP ratio. This will allow the government flexibility to chart an appropriate fiscal course It will build higher capital spending as well as support to meeting climate goals in an uncertain global environment.
• This will allow the government flexibility to chart an appropriate fiscal course
• It will build higher capital spending as well as support to meeting climate goals in an uncertain global environment.
• The size of the Budget has gone up only marginally. The overall borrowing programme of the government is almost unchanged It has come down marginally
• The overall borrowing programme of the government is almost unchanged
• It has come down marginally
• Overall expenditure: Slight increase in overall expenditure: capital expenditure remains more or less unchanged. Budget estimates for 2024-25 show only marginal increase in allocation in most of the items of expenditure compared to that of 2023-24. In the case of commerce, industry and energy, there is a decline in Budget estimates. The revised estimates for 2023-24 are lower than the Budget estimates for the same year. Social welfare and scientific departments are notable in this context. Effective capital expenditure(capital expenditure plus the grant in aid for creation of capital assets): have come down when we compare revised estimates and provisional actuals for 2023-24. It is an indication of the lack of capacity of the government to spend. It will undermine the expected multiplier effects of such expenditures. The same levels of capital expenditure imply that the government would bank more on private investments, as indicated in the Economic Survey which has not yet registered a significant increase in recent years.
• Slight increase in overall expenditure: capital expenditure remains more or less unchanged.
• Budget estimates for 2024-25 show only marginal increase in allocation in most of the items of expenditure compared to that of 2023-24.
• In the case of commerce, industry and energy, there is a decline in Budget estimates.
• The revised estimates for 2023-24 are lower than the Budget estimates for the same year. Social welfare and scientific departments are notable in this context.
• Social welfare and scientific departments are notable in this context.
• Effective capital expenditure(capital expenditure plus the grant in aid for creation of capital assets): have come down when we compare revised estimates and provisional actuals for 2023-24. It is an indication of the lack of capacity of the government to spend. It will undermine the expected multiplier effects of such expenditures.
• It is an indication of the lack of capacity of the government to spend.
• It will undermine the expected multiplier effects of such expenditures.
• The same levels of capital expenditure imply that the government would bank more on private investments, as indicated in the Economic Survey which has not yet registered a significant increase in recent years.
• which has not yet registered a significant increase in recent years.
#### Consumption and employment
#### ● Budget takes the route of tinkering with the new income-tax regime to leave slightly more disposable incomes for a section of taxpayers
#### ○ It is expected to stimulate demand.
#### ● The growth in indirect tax collections, there was more room for income-tax reliefs
#### ○ It would have been useful to stimulate demand and increase dwindling household savings.
#### ● The Budget expects employment growth to take place, imparting more incomes, and, hence, higher demand in the economy.
#### Issues:
#### ● The internship scheme, the direct thrust on channeling funds to first-time employees
#### ○ with commensurate benefits to companies to incentivise a hiring of more people
#### ○ providing salary top up for first time employed
#### ○ They are unlikely to create more jobs as they do not address the questions of social aspirations and technological changes which directly impinge labor market outcomes.
#### ○ The internship scheme has the additional risk of becoming a short-term urban employment programme
#### ○ It will only create a pool of the unemployed in the future.
Steps for start ups:
• Tax benefits for Indian start-ups and their investors. The scrapping the contentious angel tax for all classes of investors Aligning capital gains rates between listed and unlisted equity
• The scrapping the contentious angel tax for all classes of investors
• Aligning capital gains rates between listed and unlisted equity
• Increased limit of Micro Units Development and Refinance Agency Ltd. (MUDRA) loans from ₹10 lakh to ₹20 lakh
Way Forward
• The policy reveals good intentions, but the ways and the means to accomplish the ambitious goals set out are not divulged It casts a shadow on the possibility of realizing the targets set.
• It casts a shadow on the possibility of realizing the targets set.
• Reduction in the fiscal deficit to below 5% of GDP in FY2026 is a welcome step.
#### ● Employment growth is expected to take place with the revival of the Micro, Small and Medium Enterprises (MSME) sector through the credit route with a guarantee scheme being launched
#### ○ Asking banks to have their own models for lending that is not linked with collateral.
#### ● Assistance to States such as Andhra Pradesh, Bihar, Odisha and Jharkhand is expected to give an indirect push to investment and employment along with the thrust to housing in urban and rural areas.
#### ● MSMEs need to have not only credit but also a conducive environment to operate for their growth.
#### ○ The efficacy of providing only credit and leaving the rest to market forces might not generate the desired results.
• There is no mention of the Railways, PLI Scheme, Gati Sakthi and the Census.
• A lack of clear initiatives towards the education and health sectors to tap demographic dividend might not augur well with the vision of 2047.
• Strike a balance between cities and rural economy and to make a distinction between jobs and internships.
• Some bold steps and details of the journey to 2047 could have been outlined.
QUESTION FOR PRACTICE
Explain intergenerational and intragenerational issues of equity from the perspective of inclusive growth and sustainable growth.(UPSC 2020)(200 WORDS, 10 MARKS)
EDITORIAL ANALYSIS – Budget 2024 [PDF]